research institute for compassionate economics

Clean Coupons

Written by Diane Coffey on October 22nd, 2011

On a recent trip to Bihar, Dean, Avinash and I had the opportunity to visit a PDS dealer in Muzaffarpur district and ask him about the new cupon system for the Public Distribution System (PDS) in Bihar.

The PDS is a national program through which the central government procures food grains, and other goods, including kerosene, for distribution to the population through “fair price shops.” The people who manage these shops are PDS dealers. Five or six years ago, the government carried out a “BPL Census,” or a nationwide survey exercise to assign households to categories. BPL means “below poverty line,” and APL means “above poverty line.” Households can also be assigned to the “Antodaya” group, which is meant for the poorest of the poor, and the “Annapoorna” group, which is meant for the elderly. Households are supposed to hold a card that identifies their group.

Across the country, the PDS system has been known for its corruption, and scholars debate whether or not the system is broken beyond repair. Of course, a blanket statement such as this is not particularly helpful – whether or not PDS goods reach individual families varies by state, district, village and PDS catchment area levels. And it is easier for some people to access PDS goods due to their connections to a dealer, their caste, their persistence, and a variety of other factors.

With the above disclaimer on its likely non-generalizability, and an apology for the number of times this paragraph will use the phrase “supposed to”, I’d like to tell a story about the PDS dealer we met. Within the last couple of years, the Bihar government has changed the way it distributes PDS goods. Households are supposed to receive cupons from a government official that they are supposed to turn in to the PDS dealer at the time of purchase. They are supposed to get cupons for each good they are entitled to purchase (which depends on their group), and for each month of the year. The cupons have a barcode that, I believe, uniquely identifies that household that is supposed to receive it. The PDS dealer is then supposed to turn in these cupons when he picks up his next installment of grains. If he doesn’t have all of the cupons for his catchment area, his allotment of grain is supposed to be reduced by the amount of grain that the people who did not receive their ration were entitled to. This is supposed to encourage the dealer to distribute as much grain as possible (he makes a small commission from sales).

The PDS dealer we met claimed that this system reduced low level corruption (i.e. prevented him from stealing the goods and selling them on the open market). If he couldn’t get the grain without having the cupons, what opportunities were there for him to steal? The big problems with PDS corruption were at a higher level, he said. While this is probably true, I do not believe that the new system has done away with low level corruption. The reason: clean cupons.

As he was explaining the new system, the dealer removed several stacks of cupons from a plastic bag. He said they were cupons he had collected them from his customers. This could simply not have been true. Firstly, none of the cupons were signed by the customers, as they should have been. (Interestingly, someone had put thumbprints on all of the BPL cupons—in India, a thumbprint stands in for the signature of a person who is illiterate.) More importantly, though, all of the cupons looked new, clean and crisp. Not a torn of dirty cupon in the stack.

If anyone reading this post has ever asked a poor householder to see an official document it possesses, he or she will know that the householder will almost inevitably produce a torn, tattered, and stained scrap of paper from a thin plastic bag that holds a variety of similar treasures. The leaky rooves, dirt floors and hustle and bustle of poor households means that it is very difficult to keep even the most important documents clean and dry. The clean cupons indicate to me that they had never been distributed in the first place.

Of course, this is not to say that the cupon system has not reduced low level corruption some. Maybe some of the cupons make it to the right people and help them get their rations. On the other hand, the system might increase corruption if people feel that they cannot ask for their rations without cupons, which somehow never reach them. It might also increase higher level corruption if those giving the grain to the dealers are able to demand higher bribes on the grounds that something is out of order with the cupons the dealer hands in. More research on the effects of different ways of administering PDS is certainly in order.